JPMorgan Ordered to Pay Charlie Javice’s Legal Fees in Frank Fraud Case

(Bloomberg) — JPMorgan Chase & Co. must pay Frank founder Charlie Javice’s defense costs in its suit accusing her of defrauding the bank in its $175 million acquisition of her college-loan-planning site.

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Delaware Chancery Court Judge Kathaleen St. J. McCormick concluded Monday that JPMorgan was legally obligated to cover Javice’s legal bills, rejecting the bank’s argument that her alleged fraud fell outside the scope of the 2021 merger agreement. The ruling likely also covers Javice’s legal fees tied to criminal fraud charges brought by federal prosecutors over the disputed deal.

JPMorgan sued Javice and Olivier Amar, another Frank executive, for fraud in Delaware federal court in December, claiming they falsified records to show the site had more than four million customers when it actually had less than a tenth that number. JPMorgan has since shut down the Frank site.

Javice and Amar both turned around and sued JPMorgan for legal fees in Delaware Chancery Court, saying they deserved coverage under the bank’s policies since they became JPMorgan employees after the buyout. The bank’s attorneys countered the fraud allegations negated the institution’s indemnity obligations.

Javice was charged with fraud by Manhattan federal prosecutors last month. She was also sued by the Securities and Exchange Commission. She has yet to enter a plea in the criminal case, and her lawyers and prosecutors last week asked for the case to be delayed for talks between the two sides.

McCormick also ordered JPMorgan to cover Amar’s legal fees for the same reasons the bank is on the hook for Javice’s bills. Amar, Frank’s growth and acquisition head, wasn’t named in either the criminal or SEC case.

The bank urged McCormick to deny Javice’s and Amar’s legal fee requests, noting they’d reaped millions of dollars from the Frank sale that they could use to cover their own defense costs.

The case is Javice v. JPMorgan Chase Bank NA, 2022-1179, Delaware Chancery Court (Wilmington).

(Updates with background)